Sovereign Credit Ratings and the New European Union Member States

42 Pages Posted: 6 Jun 2016

See all articles by Nick Wilson

Nick Wilson

University of Leeds - Credit Management Research Centre; Leeds University Business School

Pavol Ochotnicky

University of Economics in Bratislava

Marek Kacer

University of Leeds - Credit Management Research Centre (CMRC); Leeds University Business School (LUBS) - Accounting and Finance Division; University of Economics in Bratislava

Date Written: December 19, 2014

Abstract

This paper analyzes the factors influencing the sovereign credit ratings of the new EU member states along with potential entrants. We model the ratings of the three rating agencies using a range of macroeconomic and governance variables and panel regression techniques. The unbalanced panel consists of ratings on fourteen countries over the years 1993–2012. Our sample covers a group of countries that have made the transition from planned economies, entered the European Union and in some cases the euro. In addition to the variations across ratings agencies, the panel includes the pre- and post-crisis period, country entry point into the EU and the timing of entry into the Eurozone. The rating of these countries is therefore particularly challenging against the background of shifting policy initiatives of the member states. We focus on the main factors that drive ratings for these countries, their relative importance, the predictive accuracy of the models, agency consistency and compare the results with the findings of previous studies. We find that the political stances (or changes in political stances) and geographic location (and, therefore, trading partners) of countries are important factors determining ratings in more turbulent periods.

Keywords: sovereign credit ratings, European Union, ratings

Suggested Citation

Wilson, Nicholas and Ochotnicky, Pavol and Kacer, Marek, Sovereign Credit Ratings and the New European Union Member States (December 19, 2014). Journal of Credit Risk, Vol. 10, No. 4, 2014, Available at SSRN: https://ssrn.com/abstract=2789613

Nicholas Wilson (Contact Author)

University of Leeds - Credit Management Research Centre ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 4472 (Phone)

Leeds University Business School ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 4472 (Phone)

Pavol Ochotnicky

University of Economics in Bratislava ( email )

Dolnozemská cesta 1
Bratislava, 852 35
Slovakia

Marek Kacer

University of Leeds - Credit Management Research Centre (CMRC) ( email )

Leeds, LS2 9JT
United Kingdom

Leeds University Business School (LUBS) - Accounting and Finance Division ( email )

Leeds LS2 9JT
United Kingdom

University of Economics in Bratislava ( email )

Dolnozemská cesta 1
Bratislava, 852 35
Slovakia

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